India: State-run banks at most risk if Basel-III norms implemented

September 14, 2016

Onmanorama News

Increased capital requirements under Basel III norms may result in half of domestic lenders breaching trigger levels, credit rating agency, Fitch said while suggesting that government allocate more capital to state-run banks as they will be the most affected.

With poor existing capital buffers and weak prospects for raising capital through market channels, the state-run lenders are most at risk, said Fitch.

The progressive increase in minimum capital requirements under Basel III is likely to put nearly half of Indian banks in danger of breaching capital triggers," it said.

At the end of June 2016, the total capital adequacy ratio (CAR) for 11 banks was at or lower than the minimum of 11.5 percent required by end-March 2019, when the capital- intensive Basel III framework will be adopted in full.

There is a roadmap of steady increase in the capital buffers till the full adoption, Fitch said,adding that six of the 11 banks do not have sufficient capital to meet the March 2017 milestone. Read more